Long-Run Effects of Super Low Fertility on Housing Markets

Jangyoun Lee and Hyunduk Suh
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Jangyoun Lee: Incheon National University

No 2023-2, Inha University IBER Working Paper Series from Inha University, Institute of Business and Economic Research

Abstract: The total fertility rate (TFR) in Korea fell to the historically lowest value of 0.78, reaching the state of super low fertility, also similarly observed in other East Asian countries. We quantitatively assess future implications of super low fertility on housing markets using an overlapping generations (OLG) general equilibrium model, which features housing markets and demographic transitions. The results predict that while the current housing boom will continue in the near future, real housing prices will eventually decline after 2035 because of low fertility. Among government policies, increasing the housing supply or the birth rate can mitigate this long-term housing boom-bust cycle and is welfare-improving for currently young generations. Meanwhile, stricter caps on the LTV ratio are ineffective in stabilizing the housing cycle and welfare-reducing except for old generations.

Keywords: super low fertility; OLG model; housing markets; housing supply; LTV policy (search for similar items in EconPapers)
JEL-codes: J11 J13 R21 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2023-08
New Economics Papers: this item is included in nep-dem, nep-dge and nep-ure
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